Announcing the deal on Monday, California-based Lumentum said the purchase was aimed at broadening its portfolio of laser offerings and getting an edge in a fast-developing market for 3D sensing technology.

“Investors have been waiting for this industry to consolidate for the past 2-3 years given too many companies are chasing the same customers and the industry has massive redundant research and development expenses,” Jensen added.

The deal helps Lumentum add Oclaro’s wafer fabs in UK, Japan and Italy to its existing capacity, while it is looking to ramp up production of 3D sensing laser chips.

Apple had awarded $390 million to rival Finisar in December to boost production of laser chips.

“We’re pretty excited about adding this fab capability ... to be able to tackle the really huge pipeline of 3D sensing designs that we’ve got in front of us,” said Lumentum’s Chief Executive Officer Alan Lowe on a post-earnings call.

The deal is expected to immediately add to Lumentum’s adjusted earnings per share, the companies said in a joint statement.

Lumentum intends to fund the cash consideration with a combination of cash from the combined companies’ balance sheets and $550 million in debt financing.

Oclaro, which makes optical components for data center markets said its stockholders are expected to own about 16 percent of the combined company when the deal closes.

Deutsche Bank Securities served as financial adviser to Lumentum and Wilson Sonsini Goodrich & Rosati as legal counsel, while Jefferies LLC was the financial adviser to Oclaro and Jones Day the legal counsel.

Reporting by Sonam Rai and Arjun Panchadar in Bengaluru; editing by Patrick Graham